Running a business can be unpredictable, but a good record-keeping system can make things easier. It is important to know the documents and evidences that you need to maintain, how to keep records and how long to keep them for.
There are many benefits to keeping good records. It can help you to:
- Keep track of your business' health, so you're able to make good business decisions
- Meet your tax and superannuation obligations
- Manage your cash flow
- Demonstrate your financial position to banks or other lenders
Tax and superannuation records you must keep
You must keep records of all transactions related to your business’s tax and superannuation affairs, including records that support the information you include in your tax returns and reports. The records you need to keep depend on the tax and superannuation obligations of your business and the structure of your business (sole trader, partnership, company or trust).
The Australian Taxation Office (ATO) requires that:
Your records must not be changed and must be stored in a way that restricts the information from being changed or the record damaged
- You need to keep most records for five years, starting from when you prepared or obtained the records, or completed the transactions (or acts they relate to), whichever is the later
- You need to be able to show the ATO your records if they ask for them
- Your records must be in English or able to be easily converted to English.
How to keep records
You can keep records electronically or in paper form. The ATO recommends that businesses use electronic record keeping if possible, as they are progressively moving towards electronic reporting for tax and super obligations. Keeping your records electronically should make some tasks easier and save you time once you have your system set up.
If you keep your records electronically, there’s no need to also keep paper copies unless a particular law or regulation requires a paper copy.
You can also store and keep paper records electronically. The ATO accepts images of business paper records saved on an electronic storage medium, provided the electronic copies are a true and clear reproduction of the original paper records and meet their record-keeping requirements. Once you have saved an image of your original paper records, you don’t have to keep the paper versions.
Whichever you choose, make sure you store your records in a secure place. Back up your records and, if possible, have a secure off-site storage location, which may include cloud storage.
How long to keep records for
In general, you need to keep most records for five years. Starting from when you prepared or obtained the records, or completed the transactions (or acts they relate to). There are some situations where you will have to keep records for longer than five years, including if your business owns capital assets that are subject to capital gains tax – refer to the ATO’s Records for capital gains tax.The Australian Securities & Investments Commission (ASIC) requires companies to keep records for seven years.
Please note that the information here is a general overview. Taxation is a complicated matter and you should seek specific advice from a qualified and experienced professional suited to your circumstances.